At the March 26 Council meeting, the annual report on the University budget and plans for the next academic year preceded an Open Forum. President Amy Gutmann turned to Vice President for Budget and Management Analysis Bonnie Gibson for the report on the Fiscal 2008 Budget and the Fiscal 2009 Undergraduate Total Charges. Dr. Gutmann then had Steven Bilsky, director of Recreation and Intercollegiate Athletics, present plans for the athletic facilities, as part of Penn Connects.

Ms. Gibson’s overview of the FY 2008 Operating Budget noted the $5.025 billion in expenditures is up 8.7% compared to FY 2007 actual: $2.44 billion for the Academic Budget and $2.58 billion for the Health System. The Academic Budget is balanced; the Health System has a surplus of $154.6 million after transfers to the School of Medicine. The Academic Budget is up 8% compared to FY 2007 actual, 0.7% compared to the FY 2007 Budget. The FY 2008 Budget includes $267.5 million in undergraduate and graduate student aid, $278 million in capital transactions including $223 million to fund projects, $84 million for equipment and library acquisitions and $39 million in external debt service.

The Academic Budget revenue of $2.444 billion is nearly divisible into thirds with 31% from sponsored programs, direct and indirect; 34% from tuition and fees, and the remaining 35% from a combination of investment income and gifts, other income, Commonwealth funding and net transfers from the Health System. Compared to FY 2007, the amount of revenue budgeted from sponsored programs is down due to a decrease in federal funding. In the Academic Budget expenditures by type, 53% is for compensation, including salaries, wages and employee benefits, 27% for current expenses, 11% for capital transactions and 8% for student aid, excluding the graduate student stipends. By Responsibility Center category, 71% of the expenditures are spent in the schools. The facilities’ allocated costs increased in 2007 due to three new buildings that were completed. In terms of the Peer Endowment comparison, Penn moved up from 11th place to 9th place with the market value of the endowment at $6.64 billion as of June 2007. However, on a per student basis, Penn ranks 61st, up from 65th.

Ms. Gibson then turned to the charges for the upcoming academic year and noted that the total undergraduates’ charges of $46,124 for FY 2009 only covers 70% of a Penn education. She noted that during the last decade, the percentage increase in tuition and fees has been constrained, ranging from 4-6% per year while the growth in the financial aid has resulted in a 6.7% decrease from the prior year in the net cost for aided students. While total charges have gone up 51% in the past ten years, the average freshman grant has gone up 77%, for an average net cost that has risen 20% in the last 10 years. Meanwhile the HEPI (the Higher Education Price Index) has gone up 41%; it identifies eight categories of operating costs of colleges and universities. Compared to peer institutions, Penn’s undergraduate charges are the second highest in the Ivy League but situated in the middle of the range for the Ivy plus other research universities to which it compares itself. The Penn-funded grant aid has risen substantially while the outside aid has not. The cost of Penn’s enhanced aid program is funded in part by an increase in the spending rule rate on the financial aid endowment to 6.5% up from 4.7%.

The PhD tuition will be reset based on the new plan of $24,000 per year, 5-year/30 credit unit standard. The research masters tuition will increase at 4.5%; professional students’ tuition will be set by the individual schools.

Athletics and Recreation

Mr. Bilsky described numerous projects that are planned to meet the needs of not only the Collegiate NCAA Division I athletic teams, but the club program, the intramural program as well as the self-directed fitness members of the Penn community. During the next decade, the goal is to develop some 47 acres in the east end of campus, along the Schuylkill River, as part of the University’s long-range master plan, Penn Connects. Phase I: 2008-2010, will include renovations to the Franklin Field Arcade, a facility that is over 100 years old, with a satellite fitness facility that retains the historic nature of the building. There are also plans to replace the six outdoor tennis courts in front of the Palestra with the Palestra Green, a move that President Gutmann called “transformative.” Phase I will also create Penn Park with several fields, 12 new tennis courts, and a new field and air structure, an all-purpose facility for athletic practices and other big events. The Levy Indoor Tennis Pavilion would also be renovated, and a softball stadium is proposed. Phase II: 2010-2012, would include Hutchinson Gym-Palestra renovations. Phase III: 2012+, includes a proposed indoor track facility and a natatorium. Mr. Bilsky said that of the $112 million goal for Phase I and II, more than $70 million has been raised.

Open Forum

Several members of the Penn community took advantage of the opportunity to ask a question of Council at the Open Forum. The first question raised concerned annual pay raises in view of the current economy. Ms. Gibson responded that Penn does look at the regional and national market indicators before setting salary pools for increases. She said that since Penn is an “employer of choice” only about 2.4% of applicants are hired of the more than 80,000 job applicants per year. She also urged everyone to look at the recently mailed personal Total Compensation reports. All units across the University are expected to take job performance into account in setting salaries.

There was a question raised about the proposed hotel at 40th and Pine Streets by an employee who lives in University City and is concerned about parking and other zoning issues on the Penn-owned property. Anne Papageorge, vice president, FRES, explained the current status of the project which is in the ‘letter of intent’ phase with the developer; a zoning hearing is set for May 6.

Comments were also raised about the Greek system and the recycling program at Penn. There will be a new website devoted to Penn’s sustainability issues. A student asked about the future of the Asian-American studies program given budgetary limitations. Another student inquired about renovations to Du Bois College House, which are in the planning phase. Another suggestion raised was to devote resources to purchase books and journals for the library in the particular field of new faculty.